The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Search results: 4.
Preemptive Bidding and the Role of the Medium of Exchange in Acquisitions
Published: 03/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb02403.x
MICHAEL J. FISHMAN
The medium of exchange in acquisitions is studied in a model where (i) bidders' offers bring forth potential competition and (ii) targets and bidders are asymmetrically informed. In equilibrium, both securities and cash offers are observed. Securities have the advantage of inducing target management to make an efficient accept/reject decision. Cash has the advantage of serving, in equilibrium, to “preempt” competition by signaling a high valuation for the target. Implications concerning the medium of exchange of an offer, the probability of acceptance, the probability of competing bids, expected profits, and the costs of bidders are derived.
Dual Trading in Futures Markets
Published: 06/01/1992 | DOI: 10.1111/j.1540-6261.1992.tb04404.x
MICHAEL J. FISHMAN, FRANCIS A. LONGSTAFF
With dual trading, brokers trade both for their customers and for their own account. We study dual trading and find that customers who are less likely to be informed have higher expected profits with dual trading while customers who are more likely to be informed have higher expected profits without dual trading. We also examine the effects of frontrunning. We test the major empirical implications of our model. Consistent with the model, dual traders earn higher profits than non‐dual traders, and customers of dual‐trading brokers do better than customers of non‐dual‐trading brokers.
Disclosure Decisions by Firms and the Competition for Price Efficiency
Published: 07/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb04382.x
MICHAEL J. FISHMAN, KATHLEEN M. HAGERTY
This paper develops a model of the relationship between investment decisions by firms and the efficiency of the market prices of their securities. It is shown that more efficient security prices can lead to more efficient investment decisions. This provides firms with the incentive to increase price efficiency by voluntarily disclosing information about the firm. Disclosure decisions are studied. It is shown that firms may expend more resources on disclosure than is socially optimal. This is in contrast to the concern implicit in mandatory disclosure rules that firms will expend too few resources on disclosure.
Dynamic Agency and the q Theory of Investment
Published: 11/19/2012 | DOI: 10.1111/j.1540-6261.2012.01787.x
PETER M. DEMARZO, MICHAEL J. FISHMAN, ZHIGUO HE, NENG WANG
We develop an analytically tractable model integrating dynamic investment theory with dynamic optimal incentive contracting, thereby endogenizing financing constraints. Incentive contracting generates a history‐dependent wedge between marginal and average q, and both vary over time as good (bad) performance relaxes (tightens) financing constraints. Financial slack, not cash flow, is the appropriate proxy for financing constraints. Investment decreases with idiosyncratic risk, and is positively correlated with past profits, past investment, and managerial compensation even with time‐invariant investment opportunities. Optimal contracting involves deferred compensation, possible termination, and compensation that depends on exogenous observable persistent profitability shocks, effectively paying managers for luck.